Navigating the UK's Regional Office Market in 2024
From Scarcity to Strategy: Navigating the Supply Gap in the UK’s Key Regional Office Markets
In a recent event hosted by JLL, more than 200 stakeholders comprising office developers, investors, and occupiers convened to engage with JLL's regional office agency and capital markets teams for an incisive dialogue on the Big 6 regional office markets, encompassing Birmingham, Bristol, Edinburgh, Glasgow, Leeds, and Manchester.
The session, titled 'Mind The Gap', highlighted an imminent supply constraint projected to manifest from 2025 onwards across these key regional markets. As mentioned by Ian Wills, JLL's director in the Bristol office, “The development tap has already been turned off for 18 months and space being delivered in 2025 and 2026 will be at least 50 to 70% below average. This is at a time when over 60% of take-up is focussed on EPC A and B space in sustainable and amenity-rich buildings.”
This impending gap between supply and demand is set to energise rental growth within the Big 6 – rents reaching £50 per square foot in some markets appear not just probable, but imminent. Our teams underscored the implications of this surge: an opportunity for developers, for whom it could underwrite financial viability for new projects, yet a budding challenge for occupiers. The advice to occupiers in this climate is unambiguous – forward planning and securing current inventory at present rents could be critical.
Tom Brammeld, JLL's director in the Leeds office, shifted focus to the evolving workplace dynamics post-Covid. “With the average number of days back in the office now at 3.1 days globally, the gap between employers’ and employees’ expectations is now at its narrowest post-Covid and therefore companies can now better plan their space needs. The challenge for them as the economy improves is the old one - planning for growth. Already we have seen many occupiers able to plan ahead more confidently, putting further pressure on existing supply.”
Within the capital markets realm, disparity takes a different form—reflective in the differentials in UK office pricing when compared with European and global benchmarks. As per Ben Kelly, JLL's capital markets director in Birmingham, the present context unfolds 'generational buying opportunities'. Markedly, the transactional landscape indicates an uptick in property acquisitions funnelled towards alternative uses, a trend worth noting for strategic investment considerations.
Expanding the discussion’s horizon, we ventured into the transformative impact of Artificial Intelligence (AI) on regional office demand. Ed Parry-Jones, JLL UK’s Head of Technology and Data for Agency, presented a dual-faceted narrative: AI, in the near term, may provoke market disturbances and potential job displacements. However, casting a medium to long-term outlook, AI looms as a harbinger of exponential economic benefits and expansion possibilities for the UK economy at large.
For an in-depth exploration of our findings and insights, JLL's comprehensive Big 6 report is available for download on our website or you can watch the highlihgts of our event below.
